News Archive

AIG first quarter earnings down slightly on interest rates, returns

NEW YORK (Reuters) – American International Group Inc’s (AIG.N) first-quarter earnings fell slightly as low interest rates and weaker returns from alternative investments offset improvements in its commercial insurance business.

The U.S. insurer also said on Thursday that it authorized the buyback of up to $3.5 billion in additional shares.

AIG’s posted operating earnings of $1.69 billion, or $1.22 per share, in the quarter. That was down around 3 percent from a year earlier, when it had operating earnings of $1.74 billion, or $1.18 a share.

Analysts, on average, had expected earnings of $1.19 per share, according to Thomson Reuters I/B/E/S. It was not immediately clear whether the analyst estimate was directly comparable to operating earnings.

The company’s net income rose more than 50 percent to $2.47 billion, bolstered by one-time gains from the sale of two of its large shareholdings.

AIG has focused more closely on its core businesses after bad bets on derivatives nearly sank the company – the largest commercial insurer in the United States and Canada – during the financial crisis.

“Our diversified business model and balance sheet deleveraging highlight how we have reduced our overall risk level,” AIG Chief Executive Peter Hancock said in a statement.

As interest rates have remained very low, bond investors – including insurers – have struggled to achieve adequate returns. AIG’s net investment income fell in all the company’s business segments.

In AIG’s commercial insurance segment, operating income rose to $1.46 billion from $1.42 billion as underwriting results improved, operating income at its consumer insurance operations fell around 19 percent to $945 million.

(Reporting by Michael Erman. Editing by Andre Grenon)

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Exclusive: Intel’s standstill with Altera expires in June

(Reuters) – Intel Corp (INTC.O) signed a standstill agreement earlier this year with Altera Corp (ALTR.O) that expires on June 1, giving the world’s largest chipmaker the option to launch a hostile bid after that, according to sources familiar with the matter.

The agreement, disclosed to Reuters by the sources this week, explains why Intel has refrained from launching a tender offer for Altera’s shares once their negotiations broke down. It also underscores the risk Altera faces of such a hostile bid.

Earlier this month, Altera rejected an unsolicited $54 per share offer from Intel following months of negotiations, the sources said, asking not to be identified discussing confidential information. They said Altera agreed to engage in these talks on the basis that Intel would not go public with any offer until June.

In February, Intel discussed offering $58 per share for Altera, based on publicly available information it reviewed at the time, according to the people. After signing a non-disclosure agreement and combing through non-public information, including the company’s outlook, it ended up revising down its offer, they said. Last week, Altera posted a sequential 9 percent decline in revenue for the first quarter and said it also expects weakness in its second-quarter guidance, particularly around its wireless business.

It is unclear whether Intel would take its proposal directly to shareholders, the sources said, but it remains an option available to it.

Intel and Altera both declined to comment.

The acquisition of Altera, which makes programmable chips widely used in cellphone towers and industrial applications and by the military, would underscore Intel Chief Executive Officer Brian Krzanich’s determination to expand into new markets as the personal computer industry loses steam.

TIG Advisors LLC, an investment firm that holds shares in Altera, challenged a nomination to the company’s board of directors on Monday over Altera’s refusal to engage with Intel about a potential merger.

(Additional reporting by Liana Baker; Editing by Ted Botha)

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Greece signals concessions in crunch talks with lenders

ATHENS (Reuters) – Greece’s government signaled the biggest concessions so far as talks with lenders on a cash-for-reforms package started in earnest on Thursday, but tried to assure leftist supporters it had not abandoned its anti-austerity principles.

Prime Minister Alexis Tsipras’s three-month-old government is under heavy pressure at home and abroad to reach an agreement with European and IMF lenders to avert a national bankruptcy. A new poll showed over three-quarters of Greeks feel Athens must strike a deal at any cost to stay in the euro.

An enlarged team of Greek negotiators began talks with the so-called Brussels Group representing the euro zone, the International Monetary Fund and the European Central Bank to discuss which reforms Greece will turn into legislation rapidly in exchange for aid.

The talks are expected to continue through the May Day holiday weekend until Sunday, with Tsipras willing to step in to speed things up if necessary, a Greek official said. In a sign of seriousness, both sides agreed on a news blackout at the meeting, a euro zone official said.

Greece wants an interim deal by next week, hoping this will allow the ECB to ease liquidity restrictions before a 750 million euro payment to the IMF falls due on May 12. Athens has suggested it will struggle to pay the installment.

Before that, it also has to repay 200 million euros to the IMF by May 6, although this is expected to be less of a problem.

The head of the Eurogroup of euro zone finance ministers, Jeroen Dijsselbloem, said at a meeting with members of the Dutch parliament that the bloc was prepared for any outcome.

Asked whether there was a “plan B” should Greece default or be forced out of the euro zone, he said: “(Is) the euro zone prepared for eventualities, the answer to that is: ‘yes’.”

Elected on promises to end austerity and scrap an unpopular EU/IMF bailout program, Tsipras had so far refused to give ground on his “red lines” – pensions, labor reform and state asset sales.

After a preparatory meeting of senior Greek officials on Wednesday, a top government official said Athens was willing to sell a majority stake in its two biggest ports and compromise on value-added tax rates and some pension reforms, in the clearest signal yet that it is ready to back down for a deal.

“The Greek government is ready for an honest solution which will unlock financial aid from partners and put an end to the economic asphyxiation the bailouts have caused,” Finance Minister Yanis Varoufakis, who was sidelined from the bailout talks this week to appease lenders, told Sto Kokkino radio.

However Tsipras’s office on Thursday denied any climbdown, seeking to assuage hardliners in his Syriza party as he tries to satisfy Greece’s creditors before its coffers are empty.

“The government is sticking to its red lines,” an aide to the premier said on condition of anonymity. “The government does not have the popular mandate to reach a deal that crosses red lines and it won’t do that.”


The top Greek official said Athens could consider a flat VAT rate on all goods and services except drugs, foods and books and could adjust supplementary pension payouts, though it insists on not cutting those below 300 euros a month.

The so-called “13th month” payment to pensioners has been a target of some euro zone finance ministers whose countries have less generous systems but have been lending to Greece as part of the 240 billion euro EU/IMF bailout.

On increasing the minimum wage – a campaign promise by Tsipras that is strongly opposed by lenders – the official said Athens would consult with the OECD and the International Labour Organisation before taking any action, the official said.

Athens’s move to compromise comes amid signs that a Greek default or exit from the euro could have far less effect on the rest of the currency area than the chaos feared when Greece last tottered close to bankruptcy in 2012.

While yields on two-year Greek bonds have surged to as high as 30 percent on fears of a default, other fragile peripheral euro zone nations have seen borrowing costs fall to record lows due to an ECB bond-buying plan.

In the latest sign that contagion from a Greek default would be limited, Spain’s economy grew at the fastest rate since 2007 in the first three months of this year, data showed on Thursday.

Portugal, a fellow euro zone weakling that exited its bailout last year, has completed nearly two-thirds of its 2015 bond issuance needs, limiting the potential of a setback if yields rose on worries over Greece.

However, Moody’s cautioned in a report that a Greek departure could have longer-term consequences.

“The impact of a Greek exit should not be underestimated,” said Alastair Wilson, Moody’s managing director for global sovereign risk, saying the direct impact might be limited but an exit could cause a confidence shock and disrupt debt markets.

(Additional reporting by Angeliki Koutantou in Athens, Jan Strupcewszki in Brussels and Toby Sterling in Amsterdam; Writing by Deepa Babington; Editing by Paul Taylor and David Stamp)

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Renault vote puts ball in Ghosn’s court, exposing rival visions

PARIS (Reuters) – The French government’s move to tighten its hold on Renault (RENA.PA), crowned by a rare public defeat for CEO Carlos Ghosn on Thursday, has exposed competing visions for the carmaker and its alliance with Nissan (7201.T).

Ghosn must now decide whether to fight or negotiate for closer Renault-Nissan integration, those close to him say, in the face of French determination to keep Renault in control of the alliance – and its own hand on the wheel.

“I don’t think he’s going down without throwing a punch,” one alliance executive who knows the CEO well said.

Ghosn has long favored giving Nissan more clout to match its superior sales and profit, according to Renault-Nissan veterans who say he has tried before and may do so again.

Seeking to increase its influence at Renault and other French companies in which it holds stakes, Socialist President Francois Hollande’s government has introduced a law that doubles the voting rights on shares held for more than two years.

Companies can opt out of the rule, but a resolution to this effect proposed by Ghosn failed at a shareholders’ meeting on Thursday, falling short of the required two-thirds majority with 60.5 percent support.

The result was no surprise. Economy Minister Emmanuel Macron announced three weeks ago a 1.2 billion euro ($1.34 billion) share purchase to raise France’s Renault stake to 19.7 percent from 15 percent, in order to block the opt-out.

While the government has promised to pare the stake back to 15 percent, the “Florange law” still raises its voting weight to 28 percent, all but guaranteeing a veto on strategic decisions.

Renault and Nissan both warned that the move would endanger their 16-year-old alliance just as global carmakers are increasingly competing on scale.

At Renault’s April 16 board meeting, Nissan also said any lasting increase in French government influence would prompt countermeasures, two sources have told Reuters.

Macron, a 37-year-old former investment banker, has played down the power grab, repeating his “full confidence” in Ghosn. “We’re no interventionists,” he said on Tuesday, citing his approval earlier this month for the sale of Alcatel-Lucent (ALUA.PA) to Finland’s Nokia (NOK1V.HE).

According to company insiders and French officials, however, the government acted partly because it feared Renault’s “Nissanisation” under a new convergence push by Ghosn.

On paper, Renault controls Nissan through a 43.4 percent stake, mostly acquired in 1999 when it rescued the Japanese firm from bankruptcy. Nissan has no voting rights on its 15 percent cross-holding in Renault.

But Ghosn, 61, who heads both companies, has always given them decision-making autonomy, even at the price of missed cooperation opportunities such as their separately developed and loss-making electric cars.

Nissan has meanwhile outgrown its parent to account for two-thirds of combined vehicle sales and a bigger share of profit.


Ghosn is now forcing the pace of integration by fusing production, purchasing and research and development under new alliance chiefs, all three of them Nissan managers. A Renault executive took a fourth post in human resources.

“The Renault guys are worried that Nissan’s engineering is taking over and we’re about to be eaten alive,” said Bruno Mathiez, an official with Renault’s CFE-CGC union. The same anxieties have percolated through the finance ministry.

Some observers now expect Ghosn to counter the government by restoring Nissan’s voting rights in Renault. “Many investors are focused on the risk of increased government involvement,” said Barclays analyst Kristina Church. “We believe this may provide a trigger for Renault and Nissan management to review the current structure of their cross-shareholdings.”

If Renault’s holding is cut below 40 percent – through its sale of existing Nissan shares or the issue of new ones in a capital increase – the Japanese carmaker’s voting rights could be restored under French rules.

“It’s hard to see why the government would want an entrenched conflict, or what there is to prevent Nissan from carrying out a capital increase,” said another executive close to Ghosn, who expects a “well prepared” riposte.

Ghosn has tried before to reduce Renault’s Nissan stake, according to two sources with direct knowledge of the matter, notably during the global financial crisis in late 2008.

“Renault was short of cash and planned to sell some of its Nissan shares,” one of the people said. “Everybody agreed and it was all going ahead until someone in the Treasury remembered the 40 percent rule, just a few days before the sale.”

The placement was stopped under “friendly pressure”, and within weeks the government had announced 3 billion euro emergency loans to Renault as well as Peugeot (PEUP.PA).

The source believes Ghosn will negotiate before acting unilaterally. “A company like Renault needs to have normal relations with the state,” he said.

The room for compromise looks limited, after Macron said he saw no reason to let Nissan reactivate its voting rights and vowed to hold firm “to the end”.

But the clearest explanation of the government’s stance came from Louis Schweitzer, Ghosn’s former boss. “I built the Renault-Nissan alliance according to a logic in which Renault controlled Nissan,” said the top civil servant, who oversaw Renault’s 1996 privatization.

The government must “ensure Renault keeps its roots and center in France and that the alliance maintains its original balance, with Renault in the driving seat,” he said in a radio interview this week.

(Additional reporting by Gilles Guillaume, Norihiko Shirouzu and Jean-Baptiste Vey; editing by David Stamp)

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VW, Piech clash on board appointments ahead of AGM

BERLIN (Reuters) – Volkswagen (VOWG_p.DE) and newly departed chairman Ferdinand Piech clashed again on Thursday over supervisory board appointments, causing new strains at the carmaker ahead of what is likely to become a tense shareholder meeting next Tuesday.

Piech, a dominant figure at VW for more than two decades, quit last Saturday after a damaging showdown with Chief Executive Martin Winterkorn at a time when VW is posting higher profits and pushing cost cuts.

Europe’s largest automaker on Thursday sought to regain the initiative by appointing two members of the Piech family to its supervisory board, filling vacancies left by Piech and his wife Ursula who had also quit the 20-seat panel.

Louise Kiesling, Piech’s niece, and Julia Kuhn-Piech, a board member at truckmaker MAN SE (MANG.DE) and also a member of the Piech family took up their posts on Thursday after being appointed by a court in Braunschweig, Germany, VW said.

The Piech family and the Porsche clan together hold a majority of voting shares in VW through the Porsche SE (PSHG_p.DE) holding company.

But Piech is challenging VW’s choice and instead nominated long-time automotive manager Wolfgang Reitzle – seen as a potential replacement chairman – and former Siemens (SIEGn.DE) manager Brigitte Ederer, German daily newspaper Bild said.

VW, Piech’s office in Salzburg, Porsche SE and the IG Metall union all declined to comment.

In Germany any shareholder, the works council and the company itself are entitled to nominate a new member to fill a vacancy on the supervisory board via a court, a source familiar with the matter told Reuters, citing the law on stock companies. The company is the only party of the three obliged to do so, he added.

For Piech the only way to thwart the VW appointments would be to bring legal action against the court ruling, the source said.

The Bild report suggested Piech is contemplating legal action against his own relatives in addition to already being at odds with Wolfgang Porsche, his cousin and chairman of Porsche SE, who sided with labor leaders and the governor of Lower Saxony in forcing Piech to resign.

Piech’s departure has left a void at the top of Europe’s largest automaker and a host of questions about its future are expected to be aired at the annual meeting on May 5.

In the interim former IG Metall union boss Berthold Huber has replaced Piech as head of the supervisory board, which is evenly split between stakeholder and labor representatives.

“The search for a successor to Piech at the top of the supervisory board has the utmost priority for investors,” said Ingo Speich, a fund manager at Union Investment which holds 0.6 percent of VW preference shares.

(Additional reporting by Georgina Prodhan.; Editing by Greg Mahlich)

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Exxon profit slips but beats forecasts on refining, output

(Reuters) – Exxon Mobil Corp’s first-quarter profit dropped less than expected in results posted on Thursday as margins at the refining unit of the world’s largest publicly traded oil company surged on tumbling crude prices.

While pure exploration and production companies have been stung by low prices, integrated companies such as Exxon and Royal Dutch Shell are relying on their refining units to bolster their bottom lines.

A 50 percent drop in crude prices since June has slashed the costs of feedstock for refiners.

“It was a strong quarter (for Exxon),” said Brian Youngberg, analyst at Edward Jones in Saint Louis. “Their diversified model tends to hold up better in a weaker oil market and that is seen in this quarter.”

Shares of Exxon rose 0.2 percent to $88.05 early Thursday afternoon.

The Irving, Texas-based company earned a first-quarter profit of $4.9 billion, or $1.17 per share, down 46 percent from $9.1 billion, or $2.10 per share, a year earlier.

Still, that was much better than analysts’ expectations for a profit of 83 cents per share, according to Thomson Reuters I/B/E/S. (

Oil and natural gas output was 4.2 million barrels oil equivalent per day (boed), up 2 percent from a year earlier.

Since the price crash, Exxon said it has driven down costs 20 percent in its U.S. shale oil and gas fields, as producers demand discounts from oilfield services firms.

“We expect increased savings over time,” Jeff Woodbury, vice president of investor relations, said of the company’s U.S. shale work on a conference call.


Exxon’s refining business had a profit of $1.7 billion in the first quarter, up $854 million from the same period a year earlier. Its international refining unit saw profit rise nearly fivefold.

Exxon was not alone among the integrated major oil companies.

Shell’s first-quarter profits posted on Thursday were helped by its refining operations. It reported a 56 percent drop in first-quarter net income at $3.2 billion, beating analysts’ expectations of $2.4 billion profits.

BP and Total reported higher-than-expected profits on Tuesday thanks to their fuel-making units. BP’s refining profits more than doubled and Total’s operating profits from refining tripled.

(Reporting by Anna Driver; Editing by Terry Wade and Alan Crosby)

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Fiat Chrysler shares extend losses after CEO’s consolidation call

MILAN (Reuters) – Milan-listed shares in Fiat Chrysler Automobiles (FCA) (FCHA.MI) fell to a 10-week low on Thursday, a day after its chief executive called for large-scale industry consolidation.

Sergio Marchionne on Wednesday renewed his plea for shrinking the number of players in the global auto sector to sustain the heavy capital investments needed to meet demands for cleaner, safer vehicles.

Sources told Reuters earlier this month that Marchionne was hoping for a deal to plug FCA’s weaknesses but that he may struggle to find a partner.

At the start of Wednesday’s presentation, which followed FCA’s release of weaker-than-expected first-quarter results, Marchionne said the aim of the discussion was not to put the company up for sale, but analysts were not convinced.

“Marchionne is a shrewd operator and rightly investors have been asking what was the purpose of yesterday’s presentation,” said Arndt Ellinghorst, an analyst at Evercore ISI. “The answer is very simple; he is looking to force a marriage for FCA.”

The stock closed sharply lower for the second straight session on Thursday, falling 5.7 percent to 13.35 euros. The losses over the last two sessions wiped 1.9 billion euros ($2.1 billion) off FCA’s market capitalization.

Traders said Marchionne’s comments put some of FCA’s own difficulties in the spotlight, notably its debt pile, among the industry’s biggest, weak margins in its profit engine North America and a flagging Latin American business.

The difficulties are likely to become even more apparent as the North American car market peaks.

“The company holds together operationally due to an intense management focus and disciplined financial control. But it hardly looks in good shape to withstand a downturn,” said Max Warburton, an analyst with Bernstein.

Marchionne said the option of consolidation was not “a matter of life or death for FCA”, which some industry analysts found reassuring, but also took as meaning the process could take longer than expected.

Analysts said Marchionne’s best bet would be a marriage with one of its Detroit peers to fix its margin problem in a region that in contributed 75 percent of its first quarter operating profit, but doubted there were willing partners.

“This is not to say that some partners couldn’t be strongly encouraged to at least sit down at the table,” Adam Jonas, an analyst with Morgan Stanley said. “Ford and GM (along with FCA) would stand to gain immensely from further potential platform consolidation and the elimination of duplicative/excess nameplates and product lines.”

Only hours after Marchionne’s pitch, Ford CEO Mark Fields told CNBC on Thursday the No. 2 U.S. automaker was not looking at consolidation and was focusing on its own business, echoing comments made by Mary Barra, CEO at larger rival General Motors (GM.N), earlier this month.

(Additional reporting by Bernie Woodall and Joe White in Detroit; Editing by Gareth Jones/Ruth Pitchford)

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CRC bullish on long-term prospects of Monterey Shale: CEO

NEW YORK (Reuters) – California Resources Corp expects that, as oil prices recover, technology may enable extraction of Monterey Shale reserves previously thought to be unrecoverable, the company’s chief executive said this week.

The company was spun off from Occidental Petroleum Corp in November, three days after an OPEC decision sent prices into a tailspin and contributed to the worst decline since 2008.

As prices have plummeted, CRC has scaled back its drilling, cutting its rig count to just 3 this year from 27 a year earlier. The company, which releases first quarter earnings later on Thursday, does not have any rigs operating in the Monterey shale, which runs through the San Joaquin basin and the other three basins where CRC drills.

As prices rebound, Chief Executive Officer Todd Stevens said drilling will pick up as well.

“I’m more optimistic now than a few years ago on the lower Monterey,” Stevens told Reuters on Tuesday. He said advances in drilling technologies give him hope that the oil trapped deep within the vast formation will be recoverable in the future.

The government once estimated that the Monterey Shale, which spans large swaths of the state, held up to 13.7 billion barrels of oil. Last year, the Energy Information Administration slashed its estimate of recoverable reserves from the formation by 96 percent to just 600 million barrels, citing difficulty extracting the oil.

“The Lower Monterey has an extremely limited production history compared to the Upper Monterey, with only about 25 wells drilled and completed into the Lower Monterey to date,” Stevens said.

CRC holds a leading mineral interest in the onshore portion of the shale formation and last year produced more than 50,000 barrels of oil equivalent per day from it, nearly a third of the company’s production.

Stevens did not specify how quickly production in the formation might rebound. When commodity prices rise, the company is poised to increase its activity level, while living within its cash flow, he said.

In the interim, the company is focusing on steamflood and waterflood drive mechanisms, which improve recovery from oil wells, according to Margita Thompson, a spokeswoman for CRC.

(Editing by Jessica Resnick-Ault and Andrew Hay)

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Exclusive: Pfizer is mystery bidder for rare disease drugmaker Sobi

NEW YORK/LONDON (Reuters) – Pfizer Inc (PFE.N) is the mystery bidder for Swedish Orphan Biovitrum AB (SOBIV.ST), the rare disease specialist which disclosed this week that a potential buyer had made a preliminary offer, people with knowledge of the situation said.

    The Swedish company, known as Sobi, has a market value of 35.8 billion Swedish crowns ($4.3 billion). Its medicines for rare or “orphan” conditions make it a target in a consolidating sector in which large, cash-rich drugmakers seek to bolster their portfolios with offerings from smaller biotech firms.

    Sobi did not identify its potential acquirer when it revealed on Monday that it had received an approach, but Biogen (BIIB.O) and Pfizer (PFE.N) were viewed by analysts as the most likely bidders, as they already have partnership deals with Sobi.

The sources asked not to be identified because the negotiations are confidential. The price that Pfizer has offered could not be learned. Spokesmen for both Sobi and Pfizer declined to comment.

Pfizer Chief Executive Ian Read said on Tuesday during an earnings call that he was open to deals and was “agnostic” about the size of acquisitions.

    Read added that current valuations in the biotech sector were “buoyant”, meaning Pfizer’s business development team would be very careful as it evaluated opportunities.

Sobi manufacturers a hemophilia treatment called ReFactor AF, which Pfizer sells. On Wednesday, Sobi postponed its annual shareholder meeting, which was scheduled for May 6, in the wake of the takeover proposal.

    Pfizer has actively been looking at takeover targets after an attempt to buy AstraZeneca Plc (AZN.L) failed last year. The company agreed to acquire Hospira Inc for $15 billion in February.

    Pfizer has established a Rare Disease Research Unit since it sees drugs for rare diseases, which can command very high prices, as an important opportunity in its mix of businesses.

Recent deals involving rare disease companies include Teva Pharmaceutical Industries Inc’s (TEVA.TA) acquisition of Auspex Pharmaceuticals for $3.5 billion in March, Shire Plc’s (SHP.L) acquisition of NPS Pharmaceuticals for $5.2 billion in January and BioMarin Pharmaceutical Inc’s (BMRN.O) acquisition of Prosensa Holding NV for $840 million last November.

(Reporting by Olivia Oran in New York and Ben Hirschler and Pamela Barbaglia in London; Editing by Dan Grebler)

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